Understandability and Transparency of the Financial Statements of ...

what proportion of their charitable donation reached their favoured charity‟s
beneficiaries, yet 94% considered it important to have access to that information (Senate
Standing Committee on Economics, 2008). This compared with a New Zealand
Charities Commission study which found that 40% of respondents want to ensure a
reasonable proportion of donations got to the end cause, i.e. was not spent on
administration and fund-raising (Charities Commission, 2008e).
The reluctance to support charities with high expenditure overheads ratios is not
necessarily a good thing and could lead to poor administration of the charity (Hyndman
& McKillop, 1999). The inference in the media is that spending on overheads does not
constitute spending on the charitable purpose:
There's mounting concern that donors have no way of knowing how much of
their money is going to the charity and how much is taken for so-called
overheads and expenses. (Henderson, 2002, p. A2)
However, without an efficient office most charities could not achieve their aims. Several
interviewees highlighted this, for example:
There‟s been a lot of bad press about administration fees. I think charities have
created a rod for their own backs. There‟s an obsession about how much is your
administration fee? Charities have sort of hamstrung themselves because they‟re
so cautious about how much the charity has spent on administration rather than
saying, „it‟s not about how much we retain, it‟s how impactful we are‟.
(Interviewee 9 BM – emphasis added)
There is a reluctance amongst donors to provide general operating support, even when
such funding is crucial to the operations and integrity of charities (Eisenberg, 2005).
Hunter (2009, p. 2) has suggested that the charities sector is the only sector where:
People don't think they should pay fair market value for what they are buying. In
order to do its job correctly, a charity needs more than simply the threadbare
ability to „run‟ a program.
There is a view that people involved in charity should all be voluntary. To achieve this,
volunteers must be independently wealthy, earning another source of income or on a
government benefit. This view does not take into account the growing professionalism
of the charities sector including those professionals who are working in the charities
sector as their full-time job and who bring business acumen into their charities, as seen
in the following example:
A part of that administration expense, a big chunk is salaries and people assume
that we‟re all doing this for the love of the job. We don‟t get paid what blue chip
organisations do but I‟ll spin it on its head and say I‟d rather have professional
people and pay them solid salaries because they‟re custodians of $15 million.
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